NMS Industries, Inc. v. Premium Corp. of America, Inc.

• Decision Date: 10 January 1974
• Docket Number: No. 73-1869 Summary Calendar.,73-1869 Summary Calendar.
• Citation: 487 F.2d 292
• Parties: NMS INDUSTRIES, INC., d/b/a J. A. Olson Company, Plaintiff-Appellee, v. PREMIUM CORPORATION OF AMERICA, INC., et al., Defendants, Gold Crown Stamp Company, Inc., Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

487 F.2d 292 (1973)

NMS INDUSTRIES, INC., d/b/a J. A. Olson Company, Plaintiff-Appellee, v. PREMIUM CORPORATION OF AMERICA, INC., et al., Defendants, Gold Crown Stamp Company, Inc., Defendant-Appellant.

No. 73-1869 Summary Calendar.^*

United States Court of Appeals, Fifth Circuit.

November 21, 1973.

Rehearing Denied January 10, 1974.

Hardy Lott, Porter W. Peteet, William H. Roberson, Greenwood, Miss., for defendant-appellee.

William Liston, Winona, Miss., James E. Upshaw, Greenwood, Miss., for plaintiff-appellee.

Before JOHN R. BROWN, Chief Judge, and DYER and SIMPSON, Circuit Judges.

Rehearing and Rehearing Denied January 10, 1974.

Rehearing and Rehearing En Banc Denied January 10, 1974.

PER CURIAM:

In the second appeal of this diversity case, we again find the defendant-principal attempting to disavow the acts of its agent for which two juries have found it to be liable. In the previous appeal of the case,¹ we reversed a jury verdict for the supplier, finding the District Court's instructions on the question of ratification by the principal of the acts of the agent were erroneous. The jury, having again determined that the principal was the author of its own dilemma, rendered a verdict for the supplier, apparently finding that the principal had cloaked the agent with the convincing appearance of authority. Now finding itself in the same corner, the principal attempts to extract itself on the same grounds as before. We find there is nothing new in this second appeal of the case, and accordingly we must affirm the trial court's judgment.

The First Trial

Cutting through the broad spectrum of the many issues in this case as it was originally tried—and following the first appeal, as it was re-tried—the issues come down to a fairly simple question. The record indicates that at the time relevant to the questions under consideration, Edwards was an employee of the Gold Crown Stamp Company, maintaining his office at Shreveport, Louisiana. Edwards' duty was to investigate, initiate, and develop promotions at supermarkets in various southern states for Gold Crown, a trading stamp company. Prior to the events in question, Gold Crown was acquired by Gold Bond Stamp Company, which in turn was owned by Premium Corporation of America of Minneapolis, Minnesota. Following this change in the chain of command, Edwards began reporting and taking instructions from Eichenberg, a regional supervisor for Gold Bond. Edwards continued to maintain his office in the Gold Crown building at Shreveport, Louisiana, continued to use stationery bearing the corporate name of Gold Crown and business cards with his name and that of Gold Crown, and retained various other indicia of his continued affiliation with the Gold Crown Company.

In January of 1969, only about three months after the acquisition of Gold Crown by Gold Bond, Edwards began to develop the idea of an art print promotion for Gold Crown, which would be handled through many of the same supermarkets where the trading stamps were distributed to the public as premiums for their grocery purchases. The concept was that inexpensive art prints were to be offered as a bonus to shoppers who purchased a certain amount at the particular store. The frames would also be sold at a small price to accompany the prints.

We need not set out all the details—a brief description will suffice. In the early weeks of 1969, Edwards made several trips to the Olson Company plant at Winona, Mississippi. Letters were exchanged between Edwards and his superior, Eichenberg, regarding the feasibility of the proposed promotion. At some point during this period of time, some understanding, however tenuous and however unclear, was reached between Edwards and Eichenberg regarding the purchase of some quantity of the prints and frames. Whatever this understanding was, and to what quantity and what types of art prints and frames it may have extended is both unclear and disputed. But one thing remains clear. As Edwards testified, he believed that he had the authority to place an order for some quantity of the prints and frames. Nowhere is the contention made that Edwards intended to embarrass his employer by deliberately exceeding or misinterpreting his authority regarding the art print promotion. Whatever he may have understood his authority to be, the fact remains that Edwards did place orders with Olson Company for a rather large quantity of the art prints and frames. There is some indication that Eichenberg intended that perhaps 5,000 prints of each of several types should be ordered or perhaps only 5,000 altogether. Edwards ordered 5,000 prints of each of 128 different types, for a total of 640,000 individual prints. He further ordered some 48,000 frames, the total price of all being approximately $160,000. Subsequently, when the invoices began to be received at the company's main office in Minneapolis, and there were discovered to be no supporting purchase orders authorized pursuant to established company procedures, a company auditor questioned the transaction and brought the entire dealings to light. At this point, Gold Bond and the parent company Premium Corporation, immediately contacted Olson and attempted to disavow the order except to the extent of the prints already delivered in the amount of approximately $16,000. Having already made substantial commitments² regarding the prints and frames, Olson rejected the disavowal of the majority of the contract and the lawsuit arose.

The first trial of the case resulted in a jury verdict for Olson Company for the entire amount of the contract. On that first trial, one of the theories upon which Olson asserted the liability of Gold Crown was that of ratification by the principal of the acts of the agent. In stating the issues to the jury on the first trial, the Court made a subtle, but nonetheless unmistakable error.³

Finding that "ratification by the principal of the acts of his agent must be based on full, actual knowledge of the facts of the transaction" we held that the instruction was erroneous to the extent that it permitted the jury to find Gold Crown liable on the basis of ratification where it...